Ah, the internet. What a fantastic invention. With it, you can do anything from watch funny animal videos, to reading blog posts, to purchasing life insurance. But sometimes, this overload of access can leave one flustered, and not knowing where to go for help.
In general, we are trained to believe that the more expensive something is, the better quality it is. While that may be true in some cases, that’s not necessarily the case when it comes to life insurance.
Often times, bigger and more well-known companies can get away with charging clients more, even though they’re offering the same type of coverage and plan as a smaller, yet equally reliable company would. So we’re here to help make sure you don’t get caught in that trap!
Quick Article Guide:
1. What Types of Products Can I Purchase Online?
2. What Underwriters Look For
3. Which Company Will Offer the Best Rate
4. Why You Should Choose an Independent Agency
What Types of Products Can I Purchase Online?
As you may know, there are multiple types of life insurance available. So before we get into the rates and how to get a great deal, let’s briefly discuss the different types that you can buy.
Term Life Insurance
One of the two main types of policies, term life insurance coverage is in effect for a certain period of time (i.e. 10 years, 15 years, 20 years, etc.). Usually, it is a cheaper option, and tends to be the most popular. In most cases, your premium amount will remain the same during your term. If you choose to purchase another term once your policy ends, then your premium will increase. One thing to note is that while it is more affordable, this type of policy does not build up any cash value, and only offers death benefit protection.
Permanent Life Insurance
The other main type of policy is permanent life insurance which, you guessed it, lasts permanently (until the insured passes away). In addition to providing death benefit protection, permanent life insurance also offers cash value accumulation. Within this type are subtypes such as whole life insurance and universal life insurance.
Whole Life Insurance
A type of permanent life insurance, this policy covers not only covers you for life, but maintains the same premium amount each year. This means that even if you develop a medical condition or health issue later on in life that would normally raise your premium, your premium will not change (a nice perk, if we do say so ourselves). This policy does offer cash value accumulation, and is grown on a tax-deferred basis – meaning the cash accumulation won’t be taxed unless it is withdrawn.
Universal Life Insurance
Another type of permanent coverage, universal life insurance shares similar qualities with whole life insurance in terms of death benefit protection and cash value accumulation (tax-deferred). The difference between whole and universal is the flexibility that universal offers. Unlike whole life, universal allows the policyholder to choose how much of his or her premium will go to the cash value, and how much will go to the death benefit (within the company’s guidelines, of course).
Variable Universal Life Insurance
Similar to universal life, variable universal life insurance allows the policyholder to invest his or her policy’s cash into different types of investments (like mutual funds). However, there is no guaranteed minimum cash value with this policy, so there is always a risk if you choose to invest.
Survivorship Life Insurance
This type of policy is meant for two people – usually a couple. With it, you either have the option to receive pay out when the first person dies, or have your beneficiaries receive it when you both die, depending on which policy you purchase. The premium on survivorship life coverage is typically higher than other policies, but can be much cheaper than the sum of premiums on two separate policies. Another perk about the policy is that it has much less strict criteria, meaning if one of you isn’t in great health, you may still be able to get a pretty good deal.
Final Expense Life Insurance
Final expense life insurance is usually purchased by those who are considered “seniors” (those between the age of 50 and 85). It is typically used for expenses such as a funeral, headstone, memorial service, etc. after the insured dies. It’s a good option for those who do not want to burden their spouse with those costs, and the premiums on final expense are generally affordable.
The Cheap Rate I Got Online is Completely Accurate, Right?
Not exactly. While instant quote calculators can give you a relatively close estimate, they don’t usually cover all the necessary questions when it comes to receiving an accurate rate. When applying for life insurance, you will speak to a life insurance underwriter. That underwriter will ask about basic information, such as your:
- Phone Number
- Date/Place of Birth
- U.S. Citizenship
- Social Security Number
- Driver’s License Number
In addition, they will ask some more personal questions, including asking about:
The underwriter will ask about financial information such as your annual income, your net worth, and amount of assets and liabilities. The reason they ask about this is to configure how much coverage you will be eligible for. You can generally qualify for coverage 20-30x your annual income. So if you earn $50,000 a year, you should look for coverage between $1 and $1.5 million.
Say you plan to take a trip to the Maldives. Since that is an underdeveloped country, traveling there increases your risk of exposure to certain diseases, therefore potentially increasing your life insurance rates.
Occupation and Hobbies
Similar to your travel plans, the underwriter will also want to know about any hazardous/semi-hazardous activities or jobs you participate in. If you like to go mountain biking, for example, that puts you at greater risk and creates more responsibility for your life insurance company, ergo increasing your rates as well.
Tobacco and Marijuana Use
If you smoke or consume tobacco, we have some bad news: life insurance companies don’t view that as a good thing, and will charge you much more than they would a non-smoker. Some companies will allow up to 12 cigars a year as long as you test negative for nicotine, but other than that, you aren’t usually guaranteed very good rates as a tobacco user. In addition, while it is less common, it’s sometimes similar for marijuana use, whether it be recreational or medicinal.
Your Driving Record
Got a perfect driving record? Great, you don’t have to worry about this portion. However, if you’ve gotten any tickets, DUIs, or into any accidents, there’s a good chance that your rates will go up.
Your Medical Records
After obtaining all of the information above, the underwriter will request your medical records and a medical exam (unless you apply for a no-exam policy). This will be used to determine your health class (i.e. Preferred Plus, Preferred, Standard Plus, Standard, etc.). Within these records, life insurance companies will look at the following information:
- Your weight and height (BMI)
- Your blood sample
- Blood sugar levels
- Your cholesterol levels
- Your blood pressure
- Your urine sample
- Any medical conditions you have
Here are some tips on how to make sure you ace that medical exam.
This can scare some people. They think that if they have a medical condition, or some numbers that aren’t perfect on their exam, they won’t get affordable rates. Not to worry! Many life insurance companies dole out underwriting credits, or have certain categories they are more lenient in (a.k.a., underwriting niches). However, if you are truly concerned about not receiving a good rate, or just don’t have the time to complete a medical exam, we suggest applying online for a no exam life insurance policy instead.
So How Will I Know Which Company Will Offer Me the Best Rate?
With so many life insurance companies out there, it’s no wonder that so many people get overwhelmed and end up just picking a company that is (probably) charging them too much. To compare rates, you can either call each life insurance company individually and get rates after speaking to one of their underwriters, or work with an independent agency like Term Life Advice (which we recommend).
Not to say we are denouncing life insurance companies’ instant quote calculators. Like we stated previously, those calculators are only meant to give you a ballpark estimate, and cannot take into account all the individual factors that you may have. Therefore, they should only be used as a tool rather than an exact representation of how much you expect to pay.
Why Should I Seek the Advice of an Independent Agency?
Term Life Advice is an independent life insurance agency; this means that we have licensed agents who are not affiliated with a certain life insurance company, and can compare the pros and cons of each in relation to your individual case to make sure we get you the best rates possible. Our agents also do not work off commission, and won’t try to sell you a certain company just to meet the sales quota. They truly care about each individual, and want nothing more than to find you your perfect life insurance company match. We work with over 60 highly-rated life insurance companies, so chances are, we’re bound to find a company that works well with you!
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